What can Laws 22 and 25 achieve?

What can Laws 22 and 25 achieve?

JAKARTA (JP): The Laws 22 and 25 were once touted as the B.J.
Habibie administration's attempt at reform but scholars have
identified political motives at the bottom of their
establishment.

In May 1999, one month before the first ever democratic
general elections after 1955, the Soeharto era House of
Representatives passed and president Habibie signed Laws 22 and
25 on regional government, and financial relations between the
central government and the regions respectively.

An observer, Herbert Feith, last year, speculated that Law 22
"had a lot of the spirit of the New Order about it" because the
laws were promulgated, supposedly to bring the government closer
to the people and empower the regional legislative bodies, but at
the expense of the provinces. There are indications the central
government was actually reluctant to devolve powers to the
provinces, other observers have said.

Gone will be the old hierarchical system, whereby regency
heads (bupati/walikota) were largely if not totally accountable
to the central or provincial governments and could be removed by
the governor or the minister of home affairs.

This is a break from the New Order system of government and
may appear to be very much in the spirit of reformasi, which
blames much of the corruption and nepotism of the Soeharto era on
the very tightly centralized system where most key decisions
affecting the entire country were taken by the president and a
few ministers. Also, where regional officials were totally
subordinate to the center.

"Just as the presidency should be weakened and parliament's
power strengthened at the national level, so should regional
parliaments have a much greater role in policy-making and
implementation at the regional level," according to Anne Booth, a
professor of economics at the London-based School of Oriental and
African Studies (SOAS) and long-time observer of Indonesia.

But concerns have been raised on the impact of the supposed
enhancement of the budgets of the regencies, to the roles of the
provinces and possibly subregency levels of government.

There is a feeling the laws are designed to "dis-empower" the
provinces and that the central government may still even be
reluctant to really empower the regencies--which is why Feith
suspected a New Order spirit behind the laws.

Will the regencies be able to cope with their augmented
responsibilities? What role would be given to the subregencies
(kecamatan or desa)? Will the reforms reduce the very high
dependency on central government grants which has characterized
regional and local government finance in Indonesia for decades?

Will the resource-rich provinces such as Riau, Aceh and Irian
Jaya be able to cope with their greatly increased revenues? And
what will be the net effect of the reforms on the central
government budget?

Scholars also agree that political and economical motivations
were behind the hasty establishment and implementation of the
laws.

"Both laws were adopted under former president Habibie who
took pride in having pushed the adoption of a large number of
laws in a short time, something most jurists would consider to be
a recipe for disaster," according to legal expert Gary F. Bell of
the National University of Singapore.

Debate

The first law was drafted by a small working group within the
home affairs ministry then. The second law reflected a long
process of debate between the ministry of finance and other
government agencies, both at the central and regional levels,
which had been continuing since the early 1980s.

"In the event, both laws contained dramatic new policy
initiatives which even the most ardent proponents of reform would
not have believed possible a year earlier," said Booth.

The main provisions of Law 22 on regional government are:

* The abolition of the hierarchical relationship between the
central government, provinces (daerah tingkat satu) and regencies
(daerah tingkat dua, kabupaten/kotamadya).

* Regional heads (kepala daerah) at both province and regency
levels will be elected by the regional legislative body and will
be accountable to the body rather than to what in the past have
been regarded as higher levels of government. While governors
will continue to represent the central government in the regions,
regency heads (bupati/walikota) will no longer act as
representatives of the central government and will only be
accountable to the local parliament and local electorate.

* The central government will retain responsibility on
international relations, defense, justice, monetary and fiscal
affairs, and religious affairs. In addition, it will retain
overall control over national economic planning, national
administration, high technology and human resource development
policies, and natural resource conservation.

* Regencies (daerah tingkat dua, kabupaten/kotamadya) will
assume responsibility for the implementation of programs in the
following sectors: public works, health, education and culture,
agriculture, communications, industry and trade, investment,
environmental and land use affairs, cooperatives and labor.

* Regions which cannot carry out the functions devolved to
them could amalgamate with other regions; in addition, provinces
might carry out functions which regencies are unable to perform.

The main provisions of Law 25 are:

* The existing central government grants to the regions
(province, regency and village) from both the routine and the
development budgets will be abolished.

* They will be replaced by "equalization grants" (dana
perimbangan) which will comprise a general allocation (dana
alokasi umum), a special allocation (dana alokasi khusus),
receipts from land and building taxes (pajak bumi dan bangunan),
land and building titles administration fees (Bea Perolehan Hak
atas Tanah dan Bangunan), and a share of the revenue from natural
resource exploitation.

* The general allocation will amount to at least 25 percent of
central government domestic revenue as determined in the annual
state budget (APBN). The provinces will retain ten percent of
this allocation and the remaining 90 percent will go to the
regions. There is however a provision for a change in this
division if provinces are forced to take over some expenses from
the regencies.

* The special allocation will be made from the central budget
to elected regions based on their special development needs.

* Regions will receive 15 percent of revenue from oil
exploitation carried out within their borders and 30 percent from
natural gas exploitation. They will receive 80 percent of
government revenue from mining (other than oil and gas), forestry
and fisheries. The law does not clarify whether "region" in this
context is the province or regency but only states that this
remains to be determined in future regulations.

* Regions may, with the permission of the regional people's
representatives, borrow domestically to finance a part of the
budget (how much is not specified) but may only borrow from
overseas sources through the central government.

* Regional heads will be responsible, in all financial
matters, to regional parliaments which must approve budgets and
receive full reports on budget implementation from the relevant
officials. (swe)